Ask the Ethicist: Help! Seeking Due Diligence Guidance

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By the Apra Ethics & Compliance Committee

Dear Ethicist,

I must admit, these past two years dealing with a pandemic and all its related stress has made me tired. I know I am not alone in this — and yet as the world continues to turn, I keep getting emails and tickets at work. Between research requests, creating and maintaining prospect development policies and making sure my team can do its best, I am looking for anything to help, particularly when it comes to maintaining my institution’s reputation. Do you have some sort of easy button to help me out, and keep us out of the headlines?

Sincerely,
Looking for guidance

 

Dear Looking,

The Ethics and Compliance Committee (ECC) is here to help! Due diligence can seem daunting: prospect research and prospect development is often the first line of defense in vetting and identifying risks to our institutions. Over the last few years, the ECC has done the hard work for you, and created two toolkits on how to approach due diligence:

If you’re wondering what vendor due diligence is, we’ve got that covered too. Vendor due diligence is for vetting companies who we are working or might work with. Check out this previous Ask the Ethicist column for specifics.

First, we must identify what risks we are looking for. We are searching to see if engaging with this supporter or vendor could present a legal, financial, reputational or operational risk. The toolkits define these risks, and the sort of predicaments we look for in our research and analysis.

Take the time to consider exactly what might constitute a risk to your organization. For instance, accepting a gift from a donor who maintains a blog about current political events in the U.S. could be construed as the institution endorsing the donor’s point of view. Depending on your community base, this could potentially have a positive or negative impact.

Then, we must look to see what policies we have in place and have discussions with internal stakeholders, such as leadership, gift processing and procurement. Check in with your legal counsel, risk officer or with law librarians to understand when a donor’s previous or active lawsuit could be cause for concern.

It’s possible that your leadership will want to understand what policies your peers have implemented around due diligence, too. Reaching out to other organizations will be helpful as you build procedures into your research and giving agreements.

If you don’t have a process in place, it’s ok! We have some sample policies you can use as a jumping off point. And to help you further, the ECC, in partnership with the Online Content Committee (OCC), has created an Apra Byte, which briefly guides you through both due diligence toolkits.

Now that we have the lay of the land, how do we go about the research, and what do we do if we find something unsavory? Search court records, liens and judgements, lawsuits, negative news. We have included helpful search terms and Lexis Nexis search strings for due diligence as well as vendor due diligence. It may seem daunting, but it’s what we do every day: research.

If we find something that concerns us, we must document it. In doing so, describe what you found, how it presents a risk and keep track of the source. Then pass it up the chain, in accordance with your policy. It’s important to remember that we aren’t required to make the final determination about what is and isn’t an acceptable risk; we’re simply presenting information (albeit a lot of information, in some cases) to our executive leadership and legal teams.

It's understandable to be worried about clearing someone and having negative information come out later, but we should remind ourselves (and our supervisors) that we’re humans doing the best we can with the public access tools we have available. A majority of the egregious happenings that could derail a gift approval will come up in the normal course of research, and most of us are not the FBI. If something becomes known that no one else had previously uncovered, chances are that you would not have been able to find it either.

Approaching due diligence can be extremely daunting because all of this constitutes a lot of information! Establishing a dedicated policy for conducting this work is also a significant undertaking, making it all the more important to ensure you have plenty of resources close to hand. Take advantage of the tools that we’ve mentioned above and don’t hesitate to pose questions to your Apra community. 

Sincerely,
The Ethicist 


There’s more in the works from Apra on due diligence! Watch the Apra Byte below, then stay tuned to the Apra events page for a Town Hall in May, featuring a virtual roundtable on best practices and more.    

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